Women! Assert Yourselves In Money Matters

Legitimate marketers,con artists and stockbrokers make lots of money off people’s irrational behavior.Behavioral economics tries to figure out why people consistently make irrational financial decisions and a load of recent research in behavioral economics suggests that men’s portfolios and pocketbooks would be a lot better off if they listened more to women.

Terry Odean, a University of California professor, has studied stock picking by gender for more than two decades. A seven-year study by him found single female investors outperformed single men by 2.3 percent, female investment groups outperformed their male counterparts by 4.6 percent and women overall outperformed by 1.4 percent. Why? The short answer is overconfidence. Men trade more, and the more you trade, typically the more you lose — not to mention running up transaction costs.Male investors traded 45 percent more than female investors.

Stock picking with men is too often about one-upmanship and bragging.With men, too often investing is all about keeping score. It’s a macho thing.They’re looking for hot stock tips to get the quick win and then talk about it.Additionally, men hold onto their losers a lot longer than women. They’re sure the stock will come roaring back — even as it sinks. Academics call it confirmation bias; investment advisers call it boneheaded.Women are more loss averse than men, more emotionally unattached and are far quicker to unload losers. Whereas men with their bravado, they don’t want to admit they’re wrong.

Bad financial decisions often can be traced back to unwarranted optimism, or the “positivity illusion” that things are going to turn out just right. On paper it sounds good — better to be hopeful right? Not so fast. This tendency clouds critical thinking.Confidence is good but not overconfidence. It makes people secure in a long-term strategy. They don’t react to every bit of short-term news. They don’t listen to the guys screaming loudest on TV. Once you get caught up in the emotions of investing, you’re going to buy high and sell low. There’s a lot of testosterone in some of these decisions.And too much testosterone wrecks a man’s portfolio.

“Rising levels of testosterone can lead to irrational levels of exuberance,” says John Coates, a neuroscientist at Cambridge and the author of the book, “The Hour Between Dog and Wolf: Risk Taking, Gut Feelings, and the Biology of Boom and Bust.”Coates is a former Wall Street trader who began studying the brain and biological implications of trading while working at Goldman Sachs. He performed — in his own words “an act of irrational exuberance by walking away from a high-paying managing directorship on Wall Street for the minimum wage of science.”Coates’s book looks at how our physiology affects decision making and affects risks — he studies things like cortisol and testosterone levels in stock traders. He says, in a bubble market, men become more emboldened and take more risks, while doing less homework, so they get creamed in the inevitable crash. It’s called the “winner effect” and contributes to market meltdowns.Women produce just 10 percent the testosterone of men, so they are less likely to be swept away in risky gambles. Women probably won’t make as much on the way up — but will lose a lot less on the way down.“When it comes to trading, men are more hormonal than women,” Coates says. “And if you look at brokerage records and hedge fund performance over the long term, women managers generally outperform men.”

Con artists love men, particularly well-educated, optimistic, overconfident ones who think they’re too smart to be taken. These guys are the easiest mark for the crook, according to experts on investment fraud and behavior.Studies show men tend to be overconfident and less likely to seek another opinion. Women are less excited about investing. All this leads to less of a gambling mentality among women and makes men more vulnerable to a fraud pitch.

Men are more impulsive investors — so its best if they have an investment plan in place before beginning. Having a plan makes it easier to dial back on emotional investing.Men are are better off if they bring their wives and girlfriends along to business and investment discussions and share the decision making with them. Women will tamp down some of the crazier risk. Legendary Fidelity fund manager ,Peter Lynch involved his wife and daughters in a lot of decision making, and he did pretty well.So men do well by listening when their SOs ask them to slow down and women had best start confidently asserting themselves in money matters in the best interests of family.